Stay Alert For Refinancing Opportunities
When refinancing, here are some more
strategies to consider:
Directory: Understanding Housing Values and Trends
- Time it right. The standard "rule of thumb" is
to consider refinancing whenever interest rates fall by a
percentage point or two. A better rule is to wait until the
loan rate drops enough that you'll save $5,000 to $10,000 over
the time you believe you'll own the home. That could
be thirty years, or very short if you think you'll be moving
- Get the right loan for your
future. If you still owe a lot of money on your
mortgage, it's important to pay close attention to refinancing;
if not (or if you'll be moving out in a few years) refinancing is
less important. A refinancing over twenty years could save
about twice as much money as it would over ten years.
- First, heck your mortgage's fine print.
It may require that a prepayment penalty be paid if you refinance
(usually the penalty expires after a few years.)
- Consult expert predictions. If economic
experts are predicting that mortgage rates will continue to fall,
you can wait; otherwise, you should consider locking in the
current rate by refinancing immediately.
- Consider getting cash. You can cash out
some of your home equity at the same time you refinance your
- Figure out your break-even point. For
example, if your closing costs are $2,000 and you lower your
monthly payment by $200, you'll break even in ten months.
- Read the previous section of this page
covering mortgages if you haven't already, to learn more tips.
(Next Gem: How To Lower Your Property Taxes)